Top Management Challenges Facing the USPTO

The Inspector General’s Statement
of Management Challenges

We are providing the management challenges for the U.S. Patent and Trademark Office in accordance with the provisions of the Reports Consolidation Act of 2000 (PL 106-531). Detailed information about our work is available on our web site at: http://www.oig.doc.gov/

Inspector General
Todd J. Zinser

Each year, the Department of Commerce’s Office of Inspector General (OIG) reviews the Department’s and its component bureaus’ program activities to ensure that the management, financial, and operational activities are sound and meet the requirements of the Chief Financial Officers Act, the Federal Information Security Management Act, and the Government Performance and Results Act.

The emphasis by the President, the Office of Management and Budget, and Congress on improved government accountability underscores the Department’s resolve to enhance transparency within the Department while promoting improved efficiency and effectiveness. Progress in these endeavors requires strong commitment from the senior leadership and staff at all levels.

The following is a description of the top challenges the U.S. Patent and Trademark Office faces. The OIG identified these management challenges and key issues in November 2008 (early FY 2009), which were current as of that date, and thus were used for this FY 2009 Performance and Accountability Report.

The Federal Information Security Management Act (FISMA) requires that we annually assess USPTO’s efforts to safeguard data processed by its computer systems and networks. At USPTO, IT security has been a material weakness under the Federal Managers’ Financial Integrity Act because authorizing officials had not been provided complete, accurate, and trustworthy information on a system’s security status so they could make timely, credible, risk-based decisions on whether to authorize operation. In FY 2008 we noted that USPTO improved and strengthened its security program and its certification and accreditation process, but these improvements had not been demonstrated in the systems we evaluated last year. However, we evaluated two USPTO systems this year (including one contractor-owned system) and found that both met FISMA requirements—although some deficiencies were identified. These are the first systems we found that met FISMA requirements since we recommended the material weakness in FY 2005.

Despite improvements in USPTO’s security program, we do not have sufficient evidence to recommend removal of its IT security material weakness. We noted some deficiencies that will require management’s attention. In particular, USPTO has not adequately assessed some of its more significant common controls. Over the past three years, our evaluations have noted and USPTO officials have confirmed that its computing environments rely increasingly on the use of virtual servers. However, USPTO has yet to define secure configurations for underlying virtual technologies or assess controls on such components—issues we have previously pointed out. USPTO has made significant changes in defining its systems’ boundaries and plans to recertify and accredit at least 20 of 31 operational systems, and certify and accredit five new systems in FY 2010; this will significantly test the bureau’s ability to manage IT security in accordance with FISMA requirements.

Our evaluations in the coming year will focus on these outstanding issues.

USPTO’s Long and Growing Patent Processing Times, and Its Financing Vulnerabilities

The efficiency with which the USPTO processes patent applications has a direct bearing on how well it achieves its mission of promoting U.S. competitiveness. Meeting the demand for new patents in a timely manner has been a long-standing challenge for USPTO. Increases in both the volume and complexity of patent applications have lengthened application processing times and backlogs dramatically. In 2004, USPTO had a patent backlog of nearly a half million applications and average processing times of 27 months. By 2007, processing times averaged nearly 32 months, with wait times for communications-related patents as long as 43 months. As of September 30, 2008, USPTO reported a backlog of 750,596 applications and estimated that the backlog will exceed 860,000 by September 2011. The 2010 President’s Budget reflects a backlog of 740,000 applications by the end of FY 2009, which is a decrease of approximately 10,000 applications over end of FY 2008 numbers. USPTO needs to further decrease the backlog by continuing to implement measures discussed in its 2007-2012 strategic plan that have a significant impact on reducing the backlog, such as shortening application review times; improving examiner error rates; and continue its initiatives to improve the hiring, training, and retaining of skilled examiners.

USPTO’s unique financing structure also presents challenges. There is a complex relationship between the number of patent applications filed, the size of the application backlog, the number of patents issued, and the fees USPTO collects in connection with the patent process. The Agency uses fees collected today to pay for patent applications filed and examined in prior years. With the backlog growing, processing times increasing, and the number of patents issued flattening, this method of financing could become increasingly risky. The current model for financing USPTO’s critical mission warrants attention to ensure that it will continue to provide sufficient funding to process all backlogged applications as well as any newly filed.

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